Still no change to the interest rate

For the third month in a row the Bank of England has announced that there is to be no change to the base rate, which will remain on hold again at 5%. The base rate was last cut in April of this year from 5.25% to 5%, but has remained on hold since then in light of soaring inflation levels, with inflation rocketing to 3.3%.

The weakening economy has unfortunately had to be put on the back burner as a result of soaring inflation, even though industry sectors had been calling on the Bank of England to cut the base rate in order to try and boost the economy, which many think is on the brink of recession.

One industry group official said that if the economy showed any further signs of distress then the central bank would have to bite the bullet and cut the base rate despite the rate of inflation. He said: “If further gloom descends and the economic downturn gathers pace the Bank needs to be ready and willing to cut rates once again.”

There is now speculation over whether there will be further rate cuts this year. One official said: ‘The minutes of the latest Bank of England meeting and Governor Mervyn King’s Mansion House speech were on the hawkish side, suggesting that rates are likely to remain on hold in 2008. That said, with growth slowing sharply and inflation likely to peak in the autumn, we still suspect that the risk is for a rate cut before year-end.’